Dear SaaStr: If So Many Startups Fail, Why Does Everyone Want to Do Them?

Q: If 90% of start-ups fail, then why does everyone want to make a start-up instead of a simple business?

Folks want to start startups because they have a chance to look like this:

The true definition of a tech startup is probably one that if it truly achieves product-market fit, can scale almost infinitely.

The above example is of my third venture investment, Talkdesk. In 2014, it had 6 employees. Today, it has 2,000 employees and is worth $10B.

It didn’t happen overnight, but it did happen in 7 years, and most importantly, you can see how “power laws” work in the chart above. The vast majority of value was added only very recently.

Having the chance of some sort of outcome like this, or even one vaguely close to it, even a 1/10th of it, even 1/100th of it is enough.

That’s the biggest difference between a small business and a classic tech startup.

A chance, however small, that it can scale almost infinitely.

Published on August 27, 2021

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